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Are we prepared for world population implosion?
Futures 36 (2004) 583–601 www.elsevier.com/locate/futures
Are we prepared for world population implosion? Sanghan Yea School of Management and International Relations, Kyung Hee University, Kyungki-Do, Yongin City, Kihung-Eup, 449-701 Seocheon-Ni 1, South Korea
Abstract Recent United Nations’ statistics show that because people in developing as well as developed countries do not want to have many babies like previously, the world population is fast aging and ultimately, around 2050, expected to begin to decline. However, unfortunately, we do not have a clear idea about the economic consequence of depopulation yet. In this paper, we tried to solve this puzzle with the model deduced from the second law of thermodynamics, what is called, entropy theory. By analyzing the economies of the Russian Federation and North Korea that have experienced rapid reduction in population, we could prove that in a closed system, like the world or a country that is isolated or has a stagnating foreign sector, depopulation not only stops the economic growth completely but also reverses it. # 2004 Elsevier Ltd. All rights reserved.
No one can step twice into the same river, nor touch mortal substance twice in the same condition. By the speed of its change, it scatters and gathers again.— Heraclitus (B.C.?B.C.?)
Tel.: +82-31-201-2301; fax: +82-31-204-8113. E-mail addresses: [email protected] (S. Yea), [email protected] (S. Yea).
0016-3287/$ - see front matter # 2004 Elsevier Ltd. All rights reserved. doi:10.1016/j.futures.2003.10.018
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1. A puzzle The world population is aging1 fast. Kofi Anan, the UN Secretary General, was reported to tell the participants in the week long (8–12 April 2002) World Assembly on Aging held in Madrid, Spain, that by 2050, people aged 60 and older are expected to outnumber those under 15 for the first time in known history (Radio Free Europe Radio Liberty [31]). The effect of this unprecedented event on the people’s economic welfare on the earth is still so controversial that we see both the pessimistic and optimistic speculations prevail. However, the important thing that we have overlooked so far is that as long as aging is a consequence of increasing life span and dropping birth rates, it would ultimately lead to the utter reduction in population. We find that Eberstadt [7], referring to the ‘‘low variant’’ model of World Population Prospects [32] by the UN, showed that population decline would trail aging closely. He said as follows: The human population would reach its apogee around the year 2040 at somewhat over 7.7 billion—about one third more than the 5.8 billion thought to be alive today. Between 2040 and 2050, the world’s population would fall by about 85 million. From then on, world population would shrink by roughly 25% with each successive generation [7]. In country level, others have presented gloomy expectations about the future population also. For example, Table 1, which was based on the data provided by the US Census Bureau, reveals that the population in some developed countries would reach its highest point around 2020 and fall thereafter. It indicates that we are going to face not only aging but also imploding (opposed to exploding) world population. Then, how will the population reduction affect the world economy? In retrospect, as we can see in Table 2, the world economic growth has accompanied that of population. It is true that for a respective country, in time-series as well as cross-sectional analysis, higher economic growth has been tied in with lower increase, not absolute drop, in population. However, Table 2 points out that globally, there has been a clear positive relationship between economic prosperity and number of people.2 Therefore, we can infer that when the world population decreases, the economy in world wide, which is estimated by GNP, GDP or equivalent concepts, will lower or shrink. Naturally, this deduction entails a new problem how the world economy is going to get worse. Fig. 1 1 According to the definition by the United Nations, when the proportion of the people over 65 years old is more than 7%, that society will be considered as aging. It is estimated that as of 1995, the number of people over 65 years old takes 17.3% in Sweden, 15.25% in Germany, 14.1% in Japan and 12.6% in the United States in the respective total. 2 We remember that before, an economic historian, Cameron [3] proposed a national income or output (Y) function as follows: Y ¼ f ðP; R; T; X Þ, where P, R, T, and X stands for population, resources, technology and social institutions separately.
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Table 1 Population estimates of selected countries unit: 1000 Year
Germany
France
Italy
Japan
1950 1960 1970 1980 1990 1995 2000 2010 2020 2030 2040 2050
68,375 72,481 77,783 78,298 79,380 81,648 82,797 84,616 85,507a 84,939 83,010 79,703
41,829 45,670 50,787 53,870 56,735 58,150 59,330 61,069 61,849 61,926a 60,967 58,967
47,105 50,198 53,661 56,451 56,758 57,263 57,634a 57,409 55,540 52,868 49,431 45,016
83,805 94,092 104,345 116,807 123,537 125,287 126,550 127,252a 123,380 116,740 109,130 101,228
Source: US Census Bureau [14]. a The apogee of the respective population.
suggests that there could be three possibilities. Path 1 depicts that in the inertia of the past economic growth, it is going to contract slowly, which many people might want to see. Path 2 means that it will decline following the same course of the previous growth, which is mathematically attractive. Path 3 describes a disastrous situation that it is going to grow smaller faster than the diminishing population, which is unpleasant. Which route will the world economy take? By answering this question, we can assess more clearly how the aging population, when the number of people is decreasing, could influence on the world economy too. 2. Model and hypothesis 2.1. Previous studies Because the absolute decrease in the world population has been unknown to human history, we can hardly find comparable prior studies on this issue.3 However, regionally, population reduction has been witnessed and so have been the debates. According to Eberstadt [7], in the 1930s, when the specter of ‘‘depopulation’’ haunted western intellectual circles, many of the most prominent economists of the day, Alvin Hansen, Roy Harrod, John Maynard Keynes, Gunnar Myrdal, Joan Robinson, etc., made the case that low fertility and stagnant or declining popu3
In Solow’s neoclassical economic growth model, when the population gets smaller, that is, grows at a negative proportional rate, the stationary steady state cannot be established. It is questionable also if the endogenous economic growth theories, dealing with population growth rate as an endogenous variable, take into account the situation that population grows negatively.
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Table 2 World population and GDP Year
World population (millions)
GDP (US $ billion in 1990 prices)
1 1000 1700 1750 1800 1850 1900 1920 1930 1940 1950 1960 1970 1980 1990 2000
170 265 610 720 900 1200 1625 1813 1987 2213 2516 3020 3698 4448 5292 6272
18.50 35.31 99.80 128.51 175.24 359.90 1102.96 1733.67 2253.81 3001.36 4081.81 6855.25 12,137.94 18,818.46 27,539.57 41,016.69
Source: [6].
lation could be expected to compromise economic performance because they would stifle demand, press down investment rate or slow the allocation of new labor into promising and productive areas. Their thoughts seem to vindicate the logic working behind Fig. 1 but fall short of telling which path is plausible. Nevertheless, Eberstadt raised doubt about their applicability insisting that most of these arguments look weak, because they tended to underestimate the role international trade might play in linking (thus expanding) markets and in stimulating a productivity-enhancing division of labor, regardless of the population trends in a
Fig. 1. GDP and world population reduction.
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given country at a given time [7]. Nonetheless, his assertion appears not strong enough to negate what Fig. 1 proposes, because the idea that the world economy could grow in spite of declining population, to which Eberstadt’s argument unsurprisingly leads us, sounds contradictory to what really has taken place, that is, the world GDP has grown together with the world population. Table 1 tells us that in some developed countries, the drop in the number of people seems to be no longer something that might happen in the distant future. Especially, in Japan, which has been undergoing economic recession since the early 1990s and happens to be one of the fastest aging societies in the world, the prospect of depopulation appears to have become another serious headache to the economy (see [19]). Kosai et al. [16] shows that in any fertility estimation, the Japanese population is going to fall. Then, they went further to assess how the real GDP will respond to the possible demographic change. According to Kosai et al. [16], depending on how well it is going to work, the Japanese economy could register some positive growth rates. However, in the worst case, when there occur no improvements, or deteriorations, in technology, capital profitability, capital–labor ratio, cost of capital, etc., which could be considered as typical indices of system efficiency, the Japanese economy is likely to take Path 2 in Fig. 1, they revealed. We find that previous studies or their derivatives are not useful in answering the question of which path the world economy is going to take in Fig. 1. This deficiency seems to stem from the reality that they focused on the probable population changes only in a country or region, not in the world. As we well know, the world economy is a closed system4 but a national or regional one is not, because the former cannot get some financial help from the transactions with the outside but the latter can as Eberstadt [7] said before. The world economy simply does not have an outside. 2.2. The world economy and population Antonio Golini, a professor of demographics at the University of Rome, Sapienza, was reported to tell the New York Times that the rapid aging in Italy, which has the world’s oldest population believed to shrink in no time in sheer number, would make the society bear unsustainable weight from a cultural and even psychological point of view (New York Times [23]). On the economic impact, the same article informs us that not only in Italy but also in the other West European countries with fast-aging population, the sharply winnowed and less competitive work forces, surfeits of retirees and pension system that will need to be cut back deeply are commonly witnessed (New York Times [23]). These European events teach us that even population aging on its own, which means nothing but decreasing economically active people in a society, does not stop at altering the concerned economy only in figures, when it 4
A system is said to be closed if there is no exchange with its environment [17]. Countries on the earth trade and invest only among themselves. There is no meaningful outside for the world economy.
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becomes serious, to say nothing of depopulation, and that in the mean time, what else we should think about to understand the effect of depopulation on the world economy. First, we need to pay attention on how the decreasing population affects the world economy in quantity. From history, we can easily infer that there has been a positive relationship between the three—the work force, the consumption of resources and the world population, among which the former two certainly depend on the latter one. Therefore, the contracting population will trigger the chain reaction like the following that it causes the demands for labor- and resource-inputs to decrease first and then, this change ultimately brings about the output to diminish. Second, we should consider the qualitative effect the decreasing population might also set off. We have learned that the outcome of depopulation hinges on how efficiently the economy would run under the reduced inputs. The problem is that the efficiency of an economy does not seem detached from the size of its inputs— human and non-human resources. As we know, the efficiency is nothing but an indicator revealing how well a system can combine the current inputs with the capital stock accumulated.5 We recognize that increasing inputs has helped the capital stock and in turn, the efficiency augmented, that is, both have been positively connected. Therefore, the reduced inputs will cause the efficiency to fall. Then, the following question would be how badly the efficiency will deteriorate in that case. Superficially, it appears to regress exactly to the level that it achieved with the previous smaller inputs. However, on second thought, we can find that the decreased inputs will require smaller production scale or employ less capital stock than that in the period of the largest population to burden the system with surplus capacity. It means that the economy will end up with lower efficiency than it attained with the previous input level. The growing population appears to improve the economic effectiveness by way of the increased inputs.6 However, we can maintain that when the depopulation kicks off, it will make the efficiency decline faster.
5 Gross domestic product (GDP) is the market value of the goods and services produced within a given period by factors of production located in the domestic economy, whoever owns them [11: p. 553]. Therefore, the previous investment on constant capital, that is, the past purchase of capital goods, cannot enter into the calculation of current GDP. 6 History tells us that the growing human population has accompanied the enhancement of system efficiency. According to Cameron [3], the European population underwent the cycle of growth, stagnation and decline several times and the accelerating phases of each period witnessed outbursts of intellectual and artistic creativity followed by a proliferation of monumental architecture—medieval cathedrals, baroque palaces and the 19th century Gothic revival [3: p. 18]. The Kuznets remark that creative effort flourishes in a dense intellectual atmosphere, and it is hardly an accident that the locus of intellectual progress has been preponderantly in the larger cities not in the bucolic surroundings of the thinly settled countryside [20: p. 329] also works to support the affirmative link between the population and the economic efficiency.
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As a result, we can argue that the reduction in population could contract the economy through the following two stages that happens almost simultaneously. First, the outputs will go back to the level that the economy produced with the previous population because smaller population requires smaller inputs. Then, the outputs will be reduced further because the inputs that have shrunk will cause the efficiency to drop below the level that the economy maintained with the earlier amount of inputs. Therefore, the economy would never recover the prior achievements when its population continues to decrease.7 It is a matter of course that in a closed system, like the world economy, this phenomenon would be more conspicuous than in an open one, like a national or regional economy. For that reason, we can say that the world economy would grow smaller along Path 3 not Path 1 or 2 in Fig. 1 with its decreasing population. 2.3. An irreversible relationship We confirmed that the world economic growth has been available with the increasing human population, put otherwise, it has always necessitated more people to grow, and that when the population begins to decrease, the world economy will contract faster than it does and never reach the previous levels attained with the earlier smaller populations to crash down. The remaining task to do is how to describe this complicated relationship, that is, Table 2 and Path 3 in Fig. 1 at the same time, in simple terms. For this duty, the model developed based on the second law of thermodynamics, what is called, entropy theory, will be greatly helpful. Entropy can be defined as a measure of a system’s energy that is unavailable for work, or the degree of a system’s disorder, whose concept was first proposed in 1850 by the German physicist Rudolf Clausius (1822–1888) and is sometimes presented as the second law of ther7
Between 1346 and 1352, about a third of Europe’s population was wiped out by an epidemic of bubonic plague that arrived from Asia via the Crimea (Time [1]). Many have still debated on how seriously the Medieval European economy was hit by this abrupt decrease in its population. Among them, Snooks [26] has insisted that in Great Britain, the reduction in the number of people caused by Black Death brought about decrease in real income rather than increase. His following remarks about the economic consequence of Black Death in Medieval Europe allows us to imagine how badly an economy could be hurt by decreasing population more concretely. First, the halving of the economy’s size would have resulted in a backward shift along the long run average cost curve, resulting in diseconomies of scale. Secondly, the organization of the English economic system had to be adapted to a scale of operation that had existed 300 years before, and which none could remember. Thirdly, the stock of physical capital would have declined dramatically through non-use and poor maintenance, particularly because of high rates of depreciation on preindustrial capital. Finally, there may even have been a degree of technological regress, at least in the first few decades after the onslaught of the Black Death [26: p. 262] As we can see, Snooks [26] suggests that after the epidemic, the economy shrank, productivity fell, and the fast deterioration of the unused constant capitals and the technological retrogression followed, which does not mean anything but that with decreasing population, the economic competence as well as the inputs dropped greatly.
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modynamics (Encyclopedia Britannica [8]). It suggests that all the closed systems, like our entire universe, affected by the law, can never be reversible, because its entropy, or its need for sustaining energy, is increasing (Encyclopedia Britannica [8]). We have also seen this idea to be picked up by many critics of modern civilization. Among them, Georgescu-Roegen, Nicholas [11], Schumacher [25], Jeremy Rifkin [24], etc. are representative. They have concentrated on the fact that the rapid growth of industry has required the huge increase in the consumption of natural resources, especially, energy, and consequently, in pollution. It means nothing but that the world economic growth has been feasible with rising entropy and that its irreversible relationship with the amount of consumable natural resources can be found. As we well know, the earth can provide only a limited amount of natural resources. Therefore, when the supply falls, the world economy relying on the modern industry featured with increasing entropy is to be doomed, they have argued. In this context, the entropy model appears applicable in depicting how the world economy and its population are related as well. Above all, the world economy is a perfectly closed system. In addition, we have seen that the growth in population accompanied that in the world economy and that the decrease in the former will result in the latter’s disastrous plunge. Namely, the world economy and the world population can constitute another case of irreversible relationship. Thus, we can hypothesize that because the world economy has always required more people to grow, that is to say, the world economy and the human population have been connected irreversibly, the population implosion will cause the world economy to fall catastrophically. 3. Methodology An economy can mitigate or offset the negative effect originating from declining population by beefing up foreign sector-related activities, such as trade, in- or outward foreign direct investments, etc. Table 3 explains that many advanced countries having been undergoing falling population growth have constantly increased their exports. It tells us that they have compensated foreigners for the shortage in their population. As we know, the second law of thermodynamics, entropy theory, can be relevant only in a closed system and so is our model that explains irreversible relationship between GDP and population. The world economy, the aggregate of all individual economies, is closed, and we are interested in what is going to happen to it. Therefore, to prove the hypothesis, we need to analyze the economies that have been isolated economically or experienced no or little changes in their foreign sectors for a long time. On top of it, for this study to have any meaning for future forecast, we should deal with modern and industrialized ones. We see that North Korea,8 a socialist country that recently suffered from depopulation caused 8
Recently, Krugman attempted to differentiate modern economies into two, whose growth is based on expansion of inputs and on growth in output per unit of inputs [18: p. 63]. Then, he took socialist economies as representing the former, input-driven system, well. In this context, the North Korean economy can be a good subject too.
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Table 3 Exports in GDP (in 1990 price)
France Germany Netherlands UK Spain US Mexico Brazil China India Japan World Rate of growth in volume of merchandise exports in the worlda
1870
1913
1929
1950
1973
1998
4.9 9.5 17.4 12.2 3.8 2.5 3.9 12.2 0.7 2.6 0.2 4.6
7.8 16.1 17.3 17.5 8.1 3.7 9.1 9.8 1.7 4.6 2.4 7.9
8.6 12.8 17.2 13.3 5.0 3.6 12.5 6.9 1.8 3.7 3.5 9.0 0.9
7.6 6.2 12.2 11.3 3.0 3.0 3.0 3.9 2.6 2.9 2.2 5.5
15.2 23.8 40.7 14.0 5.0 4.9 1.9 2.5 1.5 2.0 7.7 10.5
28.7 38.9 61.2 25.0 23.5 10.1 10.7 5.4 4.9 2.4 13.4 17.2
3.4
7.9
5.1
Source: [21] P 362 Table F-4 and P 363 Table F-5. a The numbers in the last row represent the annual average compound growth rates in the period from 1870 to 1913, from 1913 to 1950, from 1950 to 1973, and from 1973 to 1998 respectively.
by the severe drought that had lasted for years earlier, and the Russian Federation, a converted capitalist country that is notorious for its declining population that began about 10 years ago, can work as good subjects. 4. Empirical evaluation 4.1. North Korean economy and population 4.1.1. North Korean economy under deflation Common sense teaches us that North Korea having pursued a truthfully socialist economy must have undergone shortages in all aspects. Table 4 seems to support this idea. We see that from 1995 to 2000, in production, plain downward trends set in almost all North Korean industries, as we expected. It apparently appears that the North Korean economy has been going through shrinkage. However, the North Korean market has behaved quite differently from that of the economy confirmed to have had many serious problems in its output. In Table 5, we find that the North Korean economy has suffered from significant deflations. During the period from 2000 to 2001, the average market price dropped about 27.1% and that surprises us greatly. Nonetheless, Table 6 suggests strongly that this tendency is rather old. Above all, because Table 5 relies on the North Korean official data but Table 6 does on the statistics collected in the small but nation-widely sprouting North Korean private markets free from the government control to some extent, the latter reflects reality better than the former, we can say. In Table 6, comparing the figures of 1998 with those of 2001, we notice absolute drops in prices of almost all goods, even including grain, except vegetables, fruits, beef and fish.
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Table 4 North Korean industry production Industry Energy Coal Electricity Crude oil imports Agriculture and fishery Corn Rice Fish Mining and manufacturing Iron ore Steel Automobiles Cement Light industry Fabrics Synthetic fabrics
Unit
1995
1996
1997
1998
1999
2000
10,000 ton 2370 100 million 230 kW h 10,000 ton 110
2100 213
2060 193
1860 170
2100 186
2250 194
94
51
50
32
39
10,000 ton 10,000 ton 10,000 ton
345 121 105
369 134 88
349 150 65
389 146 63
422 163 66
359 142 70
10,000 ton 10,000 ton 10,000 units 10,000 ton
422 153 0.87 422
344 121 0.85 379
291 102 0.64 334
289 95 0.64 315
379 124 0.73 410
379 109 0.66 460
100 million m2 10,000 ton
1.8
1.5
1.2
1.1
1.0
1.1
5.6
5.6
3.7
3.5
2.7
2.9
Source: Ministry of Unification [30].
North Korea has evidently experienced diminishing supply. However, the fact that the North Korean economy has undergone economy-wide deflation for a while indicates nothing but that demand has dropped faster than supply in the period. The North Korean economy notoriously isolated from the outside does not seem to have been under the sway of the aftermath of the Asian economic crisis in the late 1990s. In addition, it is unimaginable that there happened significant reduction in the national defense expenses believed to take a large proportion of the North Korean budget. Therefore, we cannot help looking for other causes. 4.1.2. North Korean economy and population decrease It is agreed upon that for at least 3 years from 1995 to 1997, North Korea suffered from severe famine. Although there have been various opinions about what Table 5 Price changes in the major North Korean goods in the period between 2000 and 2001 Goods
Rate of change
Goods
Rate of change
Food stuff Meat Fish Vegetables and seaweeds Fruits Seasonings Snacks Beverage
11.5 7.2 102.2 13.6 26.8 0.7 7.7 43.8
Dinning-out Household durables Clothes Pharmaceuticals Stationeries Others
31.6 12.4 23.1 20.7 18.4 2.0
Average
27.1
Source: Ministry of Unification [30].
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Table 6 Price changes in the major North Korean consumer goods in the farmers’ market unit: North Korean Won and percentage Classification
Goods
Unit
1998 price
1999 price 2000 price
2001 price 2000–2001 rate of change
Food stuff
Rice Corn Wheat flour Pork Egg Pollack Cabbage Seaweed Apple Salt Bean oil Red pepper Bread Bottled water Beer Shoes Soap Shirts
kg kg kg kg unit unit unit kg unit kg kg kg unit unit unit pair unit unit
77.0 39.6 61.0 181.0 16.0 32.0 9.0 31.0 23.0 19.3 255.0 273.8 19.0 3.0 78.0 1489.0 92.0 400.0
64.0 32.6 44.5 160.0 13.0 40.9 20.0 30.6 33.1 14.6 163.1 239.4 15.0 17.5 68.2 900 66.3 472.3
49.5 31.8 42.4 138.4 10.0 82.6 14.1 70.0 31.6 13.8 202.6 240.6 17.1 13.3 35 700 82.5 394.9
Fish and meat
Fruits and vegetables Seasonings
Snacks
Others
46.6 27.2 43.1 130.1 11.8 35.0 24.6 67.1 22.9 19.3 194.6 273.8 11.7 30.9 52.5 1180 64.4 613.8
6.1 17.2 1.6 6.4 14.9 136.0 42.9 4.3 37.7 28.7 4.1 12.1 46.9 57.1 33.3 40.7 28.2 35.7
Source: Ministry of Unification [30].
caused the food crisis, many have attributed it more or less to bad weather such as deluge and drought, mismanagement of water, unproductive collective farming, inefficient socialist system itself, etc (see [2]). However, it is still controversial how many North Koreans perished during this unprecedented peacetime starvation. Some are claiming that in the period between 1995 and 1997, about two million people, almost a 10th of the North Korean population or each year, approximately 800,000 people died due to malnutrition or its complications. The others argue that from 1995 to 2000, in North Korea, 600,000 in minimum or one million in maximum people deceased (see Population Council [27]). However, a few taking a more optimistic stance maintain that North Korea might not be hit that seriously by the famine, as we can see in Table 7 based on the statistics prepared by the US Census Bureau. Even so, it shows that in 1998, the North Korean population recorded total 21,234,000 persons, fewer than that of 1995 by 300,000. Put otherwise, in any aspect, nobody can deny that in the relatively short time-span, the North Korean population dropped in absolute numbers. The trend in the estimated North Korean GNP in Table 7 reveals that around 1995, the year the food shortage supposedly began, the economic situation changed dramatically. It is true that before 1995, the North Korean economy experienced shrinkages many times, but it never underwent the headlong plunge like that after 1995. Especially, between 1996 and 1998, while the total population decreased by 1.2%, the North Korean GNP diminished by about 41.1%, as we can see. Even if we
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Table 7 Trend in the North Korean economy
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Population (1000 people)a
GNP (100 million US $)b Per capita GNP (US $)b
20,019 (92.8) 20,361 (94.4) 20,711 (96.1) 21,064 (97.7) 21,361 (99.1) 21,551 (100) 21,512 (99.8) 21,334 (98.9) 21,234 (98.5) 21,386 (99.2) 21,688 (100.6)
231 (103.5) 229 (102.6) 221 (99.1) 205 (91.9) 212 (95) 223 (100) 214 (95.9) 177 (79.3) 126 (56.5) 158 (70.8) 168 (75.3)
1146 1115 1013 969 992 1034 989 811 573 714 757
Note: In the parentheses are the indexed figures compared with those of 1995. a Source: US Census Bureau [14]. b Source: National Intelligence Service [29].
compare these statistics with the gloomiest assessment about the recent North Korean demographic change, we can still find that its GNP fell faster than its population. In addition, Table 8 clearly shows that in the same period, the North Korean primary energy consumption per US dollar of GNP grew, that is, its economic efficiency declined, owing to the reduced inputs, as we have supposed previously. 4.1.3. Irreversible relationship between the North Korean economy and its population Fig. 2 tells us that the North Korean GNP of 1998 not only never reached that of 1994, which the economy had achieved with 1.2% lower population, but also diminished to that of long ago, which it had attained with a far smaller number of people. It means nothing but that the North Korean economy contracted along Path 3 in Fig. 1. Also, the fact that in 1998, no sooner did the North Korean Table 8 Trend in the North Korean primary energy consumption Year
Primary energy consumption [quadrillion (1015) Btu]
Primary energy consumption per dollar of GNP
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
2.94 3.05 3.02 3.12 3.08 3.05 2.97 2.82 2.72 2.76 2.81
127,272 133,187 136,651 152,195 145,283 136,322 138,785 159,322 215,873 174,683 167,261
Source: (1) Energy Information Administration [15]; (2) Table 7.
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Fig. 2. Trend in the indexed North Korea population and GNP.
population begin to increase than its GNP stopped plummeting and started to grow is enough to vindicate that at least in North Korea, entropy theory has governed the relationship between population and economy. 4.2. Russian economy and population 4.2.1. Economy of the Russian Federation Table 9 shows us that the Russian Federation has undergone continuous GDP decrease from 1989 to 1999. We are easily tempted to ascribe it to the malfunctioning remnants of the previous socialist regime that was not replaced completely with a capitalist system yet. However, Table 10 points out that even under socialism, Table 9 Estimated GDP (in PPP: purchasing power parity) of Russian Federation unit: US $ billion Year
GDP
Year
GDP
1989 1990 1991 1992 1993 1994
1518 1492 1454 1333 1210 1069
1995 1996 1997 1998 1999
1050 1020 1035 941 918
Source: OECD [4,13].
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Table 10 Annual GDP growth rate of Russian Federation Year 1966 Growth 7.3 rate (%)
1967 8.6
1968 8.0
1969 4.4
1970 36.7
1971 5.5
1972 4.2
1973 9.2
1974 5.9
1975 6.7
1976 5.5
1977 5.0
Year 1978 Growth 4.9 rate (%)
1979 2.7
1980 24.0
1981 1982 13.2 3.1
1983 4.0
1984 8.0
1985 2.5
1986 5.8
1987 1.4
1988 2.9
1989 2.0
Year 1990 Growth 3.0 rate (%)
1991 5.0
1992 1993 14.5 8.7
1994 1995 12.6 4.1
1996 3.4
1997 0.9
1998 4.6
1999 1.3
Source: OECD [4,13].
this kind of prolonged drop in GDP was never heard of. It seems to perplex many that although Russia converted itself from socialist, known to be inefficient in essence, to a capitalist economy, believed to be efficient, its GDP has fallen rather than leaped. According to Table 11, while the GDP of the Russian Federation drops, its international transaction has not experienced any specific change. Instead, we can find that it has amassed constant trade surplus each year. If the trade and foreign investment of the Russian Federation had grown more rapidly or if the world economy had been more beneficial to it, the reduction of its GDP would have been mitigated greatly. However, it does not mean that the foreign sector is responsible for it, as we well know. Therefore, we have no choice but to look for the endogenous explanation. 4.2.2. Declining Russian population In Table 12, we can find that since 1992, Russia has lost its population. Because differing from the North Korean population decrease caused by tragic famine, the drop in the number of Russian people is largely owing to population aging and declining fertility, it could work as an example illustrating which footstep others are going to follow.9 We can observe how seriously Russia has agonized over its shrinking population through President Putin’s annual address to the Russian 9 About this, in the World Congress of Families held in Geneva, Switzerland, in 2000, Dr. Medkov of Moscow University mentioned as follows:
Since the collapse of communism, Russia’s birth rate—previously very low—had plummeted, and now Russia’s population is falling by about one million a year, due to an aging population and a dearth of babies. Then, he added that Russia is merely ahead of most of Western Europe, which will face the same crisis within a decade or two. (News [28]).
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Table 11 Exports and foreign direct investments of Russian Federation unit: US $ million Year
Exportsa
Importsa
Inward FDIsb
1992 1993 1994 1995 1996 1997 1998 1999
42,376 44,297 53,001 65,607 70,975 69,949 58,751 62,836
36,984 26,807 28,344 33,117 32,798 38,363 32,587 22,201
n.a. n.a. 640 2016 2479 6638 2761 2861
Note: n.a.: not available. a OECD [4,13]. b UNCTAD [33].
Table 12 Trend in Russian population unit: 1000 people Year
Population ð1991 ¼ 100Þ
Year
Population ð1991 ¼ 100Þ
1990 1991 1992 1993 1994 1995
148,082 (99.7) 148,460 (100) 148,587 (100) 148,479 (100) 148,300 (99.8) 148,115 (99.8)
1996 1997 1998 1999 2000 2010
147,757 (99.5) 147,364 (99.2) 146,964 (98.9) 146,516 (98.6) 146,001 (98.3) 142,328 (95.8)
Source: US Census Bureau [14].
people held in July 2000 having emphasized the drastic demographic change as the most acute among the 16 serious problems confronting Russia.10 Table 13 tells us that with decreasing population, the total energy input of Russia has dropped to make its primary energy consumption per dollar of GDP lower than that of 1992. It means that the Russian society in 1992 was more energy efficient than in 2000. Russia had more people in 1992 than 2000. 4.2.3. Irreversible relationship between the Russian economy and its population Table 14 shows that although the Russian GDP and the industrial production appears to recover, still they are far from realizing those of 1991, the year when Russia began to experience its population reduction. On top of it, the statistics make it clear that like the North Korean, the Russian GDP contracted faster than its population. For instance, between 1991 and 2001, the population reduced by a meager 1.7% but the GDP and the industrial production fell by staggering 30% and 35%, respectively. 10
In July 2000, in his first annual presidential address to the Russian people, President Vladmir Putin listed 16 ‘‘most acute problems facing our country’’. Number one on the list, topping even the country’s dire economic condition and the diminishing effectiveness of its political institutions was the declining size of Russia’s population [9].
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Table 13 Trend in Russian primary energy consumption Year
Primary energy consumption Primary energy consumption per dollar of GDP (Btu per 1995 US dollars at market [quadrillion (1015) Btu] exchange rates)
1992 1993 1994 1995 1996 1997 1998 1999 2000
34.88 32.67 29.63 28.24 27.92 25.52 25.62 27.45 28.07
78,959 81,043 84,176 83,590 85,681 77,650 81,905 85,076 80,316
Source: Energy Information Administration [15].
Table 14 Russian GDP (in constant price) and index of industrial output ð1991 ¼ 100Þ Year
GDP
Industrial output
1992 1995 2000 2001
85.5 65.4 69.6 73.1
82 54 62 65
Source: Interstate Statistical Committee of the CIS [5].
Fig. 3. Russian population and GDP.
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Adding to it, Fig. 3 reveals that though in 1995, the Russian population declined to become as small as that in 1990, its GDP reduced further to get equal to that of years prior to 1990 with a much smaller population. It proves that the Russian economy has been shrinking along Path 3 in Fig. 1 and that the entropy theory has been applied to the relationship between economic growth and population once again. 5. Conclusions We have ascertained through the analysis of the North Korean and the Russian experience that in a closed system, economic growth is related irreversibly with population and when the latter grows smaller, the former is likely to contract more. From this, we can easily conclude what is going to happen to the world economy, when the number of people on the earth begins to decrease. Then, does it make any sense for us to worry about something that might occur about 50 years later? The answer seems affirmative theoretically. Population aging already embarked on in many developed countries. This trend will continue even under a contracting population. Currently, we are witnessing an aging population that still grows. However, in the near future, we are likely to see population aging come with its shrinkage. A serious problem is that many studies trying to deal with the economic or social effect of aging population do not seem to pay much attention to this difference. This study clarifies that if the total population of a society begins to decline and if there is no change in its international transactions, aging, apparently connoting a decrease in work force, could bring about more damaging impact on the economy than we expect presently. To that extent, we can say that the current analyses not considering the irreversible relationship between economy and population are probably to underestimate the real effect of population aging (see [16]). What should we do for this event? First, all countries should try to maintain their birth rates above the replacement level.11 For this, we must work for a society in which babies are welcomed, not destroyed; children are regarded as a blessing, not an inconvenience; and motherhood is treasured as an honorable vocation (News [28]). The current small efforts by the respective economies will save the world economy a lot in the future. Next, we need to transform the economic system to grow not entailing a larger population. We can deduce that an economy mainly consisting of the industries featured with mass production and consumption, which necessitates them to mobilize massive capital stocks and inputs, will be hurt more seriously by the depopulation than not, because the economic efficiency 11 Mathematically, two babies per one fertile woman are sufficient to maintain the present population size. However, all the babies cannot survive. Therefore, a society usually needs to uphold the fertility ratio of 2.1 to sustain the current number of people. Nevertheless, if the people’s life span continues to increase as we hope, even the 1.7 babies per one fertile woman is known to be enough to replace a society’s current population.
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in the former will be reduced more significantly than in the latter. In this respect, the expanding domain of the new economy,12 which is believed to rely less on mass production and consumption (if not, why call this ‘‘new’’?), is likely to assist us greatly in preparing ourselves for the population implosion. Lastly, we are asked to consider the demographic change more sincerely than before. This study tells us that the ever-increasing world population, which we are so accustomed to that we have even accepted it as a feared natural law not a phenomenon (see [22]), has played an important role in bringing economic prosperity to human beings. It has helped the great advancements in science and technology materialize into wealth and so it will. We see that the efforts to propagate more off springs generation after generation have been not only biologically but also economically reasonable. The endeavors to subdue the population growth in the particular countries have been desirable and will be, but we must keep them in control not to become super effective to cut down the absolute population size. However, this study has some caveats. First, we cannot say that there have been enough empirical evidences contemplated. It largely attributes to that in many countries, the shrinkage of population has not commenced yet. We may need more time to see, but we are certain to witness what we have expected in this study. Second, the real cases, those of North Korea and Russia that we brought forward to support our model do not seem to be easily generalized. Hardly anyone can insist that North Korea and Russia are showing the future of the current industrialized countries. Especially, the North Korean political as well as economic structure appears even anachronistic. Nevertheless, the other countries that have been engaged in international trade and investment actively can rarely provide closed economic systems that we must have to analyze the possible consequence of the world wide demographic change. As we mentioned before, national economies are open but the world economy is not. Only a few countries have experienced or are undergoing depopulation or are supposed to later. Fewer seem to be regarded as having developed closed systems. Unfortunately, North Korea well satisfies these two critical requirements for our analysis.
References [1] A Distant Mirror. Time, July 17, 2002. [2] J. Brill, North Korean famine claims two million lives, Disaster Relief.org, 1998 (http://www. disasterrelief.org/Disasters/980824NorthKorea). [3] R. Cameron, A Concise Economic History of the World, Oxford University Press, NewYork, NY, 1989. [4] Center for Cooperation with Non-members Database, OECD, 2002. [5] CIS-quarterly data, Interstate Statistical Committee of the Commonwealth Independent State, 2002.
12
Gordon [12] defines the representative characteristics of the new economy as the Internet and the accompanying acceleration of technical change in computers and telecommunications.
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[6] B.J. Delong, Estimating World GDP, One Million B.C.-Present, 20th Century, 1998. Available from http://www.j-bradford-delong.net/TECH/1998_Draft/World_GDP. [7] N. Eberstadt, What if it’s a world population implosion? American Enterprise Institute, 1998. [8] Encyclopedia Britannica. Available from http://www.britannica.com. [9] M. Feshbach, Russia’s population meltdown, Wilson Quarterly, 25(1), Winter (2001), 15–21. [10] S. Fischer, R. Dornbusch Economics, McGraw-Hill, New York, NY, 1983. [11] N. Georgescu-Roegen, The Entropy Law and the Economic Process, Harvard University Press, Cambridge, MA, 1971. [12] J.R. Gordon, Does the ‘‘New Economy’’ Measure up to the Great Inventions of the Past? NBER Working Paper No. 7833 (2000). [13] Gross Domestic Product, Volume, Percentage Changes from Previous Period, Seasonally Adjusted, at Quarterly rate, OECD, 2002. [14] International Data Base, US Census Bureau, 2002. Available from http://www.census.gov. [15] International Energy Database, Energy Information Administration, 2002. [16] Y. Kosai, J. Saito, N. Yashiro, Declining Population and Sustained Economic Growth: Can They Co-exist? Japan Center for Economic Research Discussion Paper No. 50 (1999). [17] A. Krause, R. Raikhlin, The Economy as an Irreversible Thermodynamics, unpublished working paper. Available from http://www.israel.net/raikhlin /social_dynamics/myengbook. [18] P. Krugman, The myth of Asia’s miracle, Foreign Affairs November/December (1994) 62–78. [19] P. Krugman, Setting Sun, Japan: What Went Wrong? 1998. Available from http://web.mit.edu/ krugman/www/japan.html. [20] S. Kuznets, Population change and aggregate output, in: Universities—National Bureau of Economic Research, Demographic and Economic Change in Developed Countries; A Conference of the Universities-National Bureau of Economic Research, Princeton University Press, Princeton, NJ, 1960. [21] A. Maddison, The World Economy: A Millennial Perspective, OECD, 2001. [22] T. Malthus, in: F. Antony (Ed.), An Essay on the Principle of Population, Penguin Books, New York, NY, 1985. [23] Persistent Drop in Fertility Reshapes Europe’s Future, New York Times, December 26, 2002. [24] J. Rifkin, Entropy: A New World View, Bantam Books, New York, NY, 1981. [25] E.F. Schumacher, Small Is Beautiful; as if People Mattered, Harper&Row, New York, NY, 1973. [26] G.D. Snooks, Economies without Time, Macmillan, London, England, 1993. [27] The North Korean Famine and its Demographic Impact, Population Council, June 2001. [28] The Age of Depopulation, News, January 15, 2002. Available from http://www.newsweekly. com.au. [29] Trend of the North Korean GDP, National Intelligence Service, 2002. Available from http:// www.nis.go.kr. [30] Understanding North Korea, Ministry of Unification, 2002. Available from http://www.unikorea. go.kr. [31] UN: World Population Aging Rapidly In Developing Countries, Radio Free Europe Radio Liberty, April 10, 2002. [32] World Population Prospects, Highlights, UN, various years. [33] World Investment Report, UNCTAD, 2000.
Are we prepared for world population implosion? Sanghan Yea School of Management and International Relations, Kyung Hee University, Kyungki-Do, Yongin City, Kihung-Eup, 449-701 Seocheon-Ni 1, South Korea
Abstract Recent United Nations’ statistics show that because people in developing as well as developed countries do not want to have many babies like previously, the world population is fast aging and ultimately, around 2050, expected to begin to decline. However, unfortunately, we do not have a clear idea about the economic consequence of depopulation yet. In this paper, we tried to solve this puzzle with the model deduced from the second law of thermodynamics, what is called, entropy theory. By analyzing the economies of the Russian Federation and North Korea that have experienced rapid reduction in population, we could prove that in a closed system, like the world or a country that is isolated or has a stagnating foreign sector, depopulation not only stops the economic growth completely but also reverses it. # 2004 Elsevier Ltd. All rights reserved.
No one can step twice into the same river, nor touch mortal substance twice in the same condition. By the speed of its change, it scatters and gathers again.— Heraclitus (B.C.?B.C.?)
Tel.: +82-31-201-2301; fax: +82-31-204-8113. E-mail addresses: [email protected] (S. Yea), [email protected] (S. Yea).
0016-3287/$ - see front matter # 2004 Elsevier Ltd. All rights reserved. doi:10.1016/j.futures.2003.10.018
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1. A puzzle The world population is aging1 fast. Kofi Anan, the UN Secretary General, was reported to tell the participants in the week long (8–12 April 2002) World Assembly on Aging held in Madrid, Spain, that by 2050, people aged 60 and older are expected to outnumber those under 15 for the first time in known history (Radio Free Europe Radio Liberty [31]). The effect of this unprecedented event on the people’s economic welfare on the earth is still so controversial that we see both the pessimistic and optimistic speculations prevail. However, the important thing that we have overlooked so far is that as long as aging is a consequence of increasing life span and dropping birth rates, it would ultimately lead to the utter reduction in population. We find that Eberstadt [7], referring to the ‘‘low variant’’ model of World Population Prospects [32] by the UN, showed that population decline would trail aging closely. He said as follows: The human population would reach its apogee around the year 2040 at somewhat over 7.7 billion—about one third more than the 5.8 billion thought to be alive today. Between 2040 and 2050, the world’s population would fall by about 85 million. From then on, world population would shrink by roughly 25% with each successive generation [7]. In country level, others have presented gloomy expectations about the future population also. For example, Table 1, which was based on the data provided by the US Census Bureau, reveals that the population in some developed countries would reach its highest point around 2020 and fall thereafter. It indicates that we are going to face not only aging but also imploding (opposed to exploding) world population. Then, how will the population reduction affect the world economy? In retrospect, as we can see in Table 2, the world economic growth has accompanied that of population. It is true that for a respective country, in time-series as well as cross-sectional analysis, higher economic growth has been tied in with lower increase, not absolute drop, in population. However, Table 2 points out that globally, there has been a clear positive relationship between economic prosperity and number of people.2 Therefore, we can infer that when the world population decreases, the economy in world wide, which is estimated by GNP, GDP or equivalent concepts, will lower or shrink. Naturally, this deduction entails a new problem how the world economy is going to get worse. Fig. 1 1 According to the definition by the United Nations, when the proportion of the people over 65 years old is more than 7%, that society will be considered as aging. It is estimated that as of 1995, the number of people over 65 years old takes 17.3% in Sweden, 15.25% in Germany, 14.1% in Japan and 12.6% in the United States in the respective total. 2 We remember that before, an economic historian, Cameron [3] proposed a national income or output (Y) function as follows: Y ¼ f ðP; R; T; X Þ, where P, R, T, and X stands for population, resources, technology and social institutions separately.
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Table 1 Population estimates of selected countries unit: 1000 Year
Germany
France
Italy
Japan
1950 1960 1970 1980 1990 1995 2000 2010 2020 2030 2040 2050
68,375 72,481 77,783 78,298 79,380 81,648 82,797 84,616 85,507a 84,939 83,010 79,703
41,829 45,670 50,787 53,870 56,735 58,150 59,330 61,069 61,849 61,926a 60,967 58,967
47,105 50,198 53,661 56,451 56,758 57,263 57,634a 57,409 55,540 52,868 49,431 45,016
83,805 94,092 104,345 116,807 123,537 125,287 126,550 127,252a 123,380 116,740 109,130 101,228
Source: US Census Bureau [14]. a The apogee of the respective population.
suggests that there could be three possibilities. Path 1 depicts that in the inertia of the past economic growth, it is going to contract slowly, which many people might want to see. Path 2 means that it will decline following the same course of the previous growth, which is mathematically attractive. Path 3 describes a disastrous situation that it is going to grow smaller faster than the diminishing population, which is unpleasant. Which route will the world economy take? By answering this question, we can assess more clearly how the aging population, when the number of people is decreasing, could influence on the world economy too. 2. Model and hypothesis 2.1. Previous studies Because the absolute decrease in the world population has been unknown to human history, we can hardly find comparable prior studies on this issue.3 However, regionally, population reduction has been witnessed and so have been the debates. According to Eberstadt [7], in the 1930s, when the specter of ‘‘depopulation’’ haunted western intellectual circles, many of the most prominent economists of the day, Alvin Hansen, Roy Harrod, John Maynard Keynes, Gunnar Myrdal, Joan Robinson, etc., made the case that low fertility and stagnant or declining popu3
In Solow’s neoclassical economic growth model, when the population gets smaller, that is, grows at a negative proportional rate, the stationary steady state cannot be established. It is questionable also if the endogenous economic growth theories, dealing with population growth rate as an endogenous variable, take into account the situation that population grows negatively.
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Table 2 World population and GDP Year
World population (millions)
GDP (US $ billion in 1990 prices)
1 1000 1700 1750 1800 1850 1900 1920 1930 1940 1950 1960 1970 1980 1990 2000
170 265 610 720 900 1200 1625 1813 1987 2213 2516 3020 3698 4448 5292 6272
18.50 35.31 99.80 128.51 175.24 359.90 1102.96 1733.67 2253.81 3001.36 4081.81 6855.25 12,137.94 18,818.46 27,539.57 41,016.69
Source: [6].
lation could be expected to compromise economic performance because they would stifle demand, press down investment rate or slow the allocation of new labor into promising and productive areas. Their thoughts seem to vindicate the logic working behind Fig. 1 but fall short of telling which path is plausible. Nevertheless, Eberstadt raised doubt about their applicability insisting that most of these arguments look weak, because they tended to underestimate the role international trade might play in linking (thus expanding) markets and in stimulating a productivity-enhancing division of labor, regardless of the population trends in a
Fig. 1. GDP and world population reduction.
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given country at a given time [7]. Nonetheless, his assertion appears not strong enough to negate what Fig. 1 proposes, because the idea that the world economy could grow in spite of declining population, to which Eberstadt’s argument unsurprisingly leads us, sounds contradictory to what really has taken place, that is, the world GDP has grown together with the world population. Table 1 tells us that in some developed countries, the drop in the number of people seems to be no longer something that might happen in the distant future. Especially, in Japan, which has been undergoing economic recession since the early 1990s and happens to be one of the fastest aging societies in the world, the prospect of depopulation appears to have become another serious headache to the economy (see [19]). Kosai et al. [16] shows that in any fertility estimation, the Japanese population is going to fall. Then, they went further to assess how the real GDP will respond to the possible demographic change. According to Kosai et al. [16], depending on how well it is going to work, the Japanese economy could register some positive growth rates. However, in the worst case, when there occur no improvements, or deteriorations, in technology, capital profitability, capital–labor ratio, cost of capital, etc., which could be considered as typical indices of system efficiency, the Japanese economy is likely to take Path 2 in Fig. 1, they revealed. We find that previous studies or their derivatives are not useful in answering the question of which path the world economy is going to take in Fig. 1. This deficiency seems to stem from the reality that they focused on the probable population changes only in a country or region, not in the world. As we well know, the world economy is a closed system4 but a national or regional one is not, because the former cannot get some financial help from the transactions with the outside but the latter can as Eberstadt [7] said before. The world economy simply does not have an outside. 2.2. The world economy and population Antonio Golini, a professor of demographics at the University of Rome, Sapienza, was reported to tell the New York Times that the rapid aging in Italy, which has the world’s oldest population believed to shrink in no time in sheer number, would make the society bear unsustainable weight from a cultural and even psychological point of view (New York Times [23]). On the economic impact, the same article informs us that not only in Italy but also in the other West European countries with fast-aging population, the sharply winnowed and less competitive work forces, surfeits of retirees and pension system that will need to be cut back deeply are commonly witnessed (New York Times [23]). These European events teach us that even population aging on its own, which means nothing but decreasing economically active people in a society, does not stop at altering the concerned economy only in figures, when it 4
A system is said to be closed if there is no exchange with its environment [17]. Countries on the earth trade and invest only among themselves. There is no meaningful outside for the world economy.
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becomes serious, to say nothing of depopulation, and that in the mean time, what else we should think about to understand the effect of depopulation on the world economy. First, we need to pay attention on how the decreasing population affects the world economy in quantity. From history, we can easily infer that there has been a positive relationship between the three—the work force, the consumption of resources and the world population, among which the former two certainly depend on the latter one. Therefore, the contracting population will trigger the chain reaction like the following that it causes the demands for labor- and resource-inputs to decrease first and then, this change ultimately brings about the output to diminish. Second, we should consider the qualitative effect the decreasing population might also set off. We have learned that the outcome of depopulation hinges on how efficiently the economy would run under the reduced inputs. The problem is that the efficiency of an economy does not seem detached from the size of its inputs— human and non-human resources. As we know, the efficiency is nothing but an indicator revealing how well a system can combine the current inputs with the capital stock accumulated.5 We recognize that increasing inputs has helped the capital stock and in turn, the efficiency augmented, that is, both have been positively connected. Therefore, the reduced inputs will cause the efficiency to fall. Then, the following question would be how badly the efficiency will deteriorate in that case. Superficially, it appears to regress exactly to the level that it achieved with the previous smaller inputs. However, on second thought, we can find that the decreased inputs will require smaller production scale or employ less capital stock than that in the period of the largest population to burden the system with surplus capacity. It means that the economy will end up with lower efficiency than it attained with the previous input level. The growing population appears to improve the economic effectiveness by way of the increased inputs.6 However, we can maintain that when the depopulation kicks off, it will make the efficiency decline faster.
5 Gross domestic product (GDP) is the market value of the goods and services produced within a given period by factors of production located in the domestic economy, whoever owns them [11: p. 553]. Therefore, the previous investment on constant capital, that is, the past purchase of capital goods, cannot enter into the calculation of current GDP. 6 History tells us that the growing human population has accompanied the enhancement of system efficiency. According to Cameron [3], the European population underwent the cycle of growth, stagnation and decline several times and the accelerating phases of each period witnessed outbursts of intellectual and artistic creativity followed by a proliferation of monumental architecture—medieval cathedrals, baroque palaces and the 19th century Gothic revival [3: p. 18]. The Kuznets remark that creative effort flourishes in a dense intellectual atmosphere, and it is hardly an accident that the locus of intellectual progress has been preponderantly in the larger cities not in the bucolic surroundings of the thinly settled countryside [20: p. 329] also works to support the affirmative link between the population and the economic efficiency.
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As a result, we can argue that the reduction in population could contract the economy through the following two stages that happens almost simultaneously. First, the outputs will go back to the level that the economy produced with the previous population because smaller population requires smaller inputs. Then, the outputs will be reduced further because the inputs that have shrunk will cause the efficiency to drop below the level that the economy maintained with the earlier amount of inputs. Therefore, the economy would never recover the prior achievements when its population continues to decrease.7 It is a matter of course that in a closed system, like the world economy, this phenomenon would be more conspicuous than in an open one, like a national or regional economy. For that reason, we can say that the world economy would grow smaller along Path 3 not Path 1 or 2 in Fig. 1 with its decreasing population. 2.3. An irreversible relationship We confirmed that the world economic growth has been available with the increasing human population, put otherwise, it has always necessitated more people to grow, and that when the population begins to decrease, the world economy will contract faster than it does and never reach the previous levels attained with the earlier smaller populations to crash down. The remaining task to do is how to describe this complicated relationship, that is, Table 2 and Path 3 in Fig. 1 at the same time, in simple terms. For this duty, the model developed based on the second law of thermodynamics, what is called, entropy theory, will be greatly helpful. Entropy can be defined as a measure of a system’s energy that is unavailable for work, or the degree of a system’s disorder, whose concept was first proposed in 1850 by the German physicist Rudolf Clausius (1822–1888) and is sometimes presented as the second law of ther7
Between 1346 and 1352, about a third of Europe’s population was wiped out by an epidemic of bubonic plague that arrived from Asia via the Crimea (Time [1]). Many have still debated on how seriously the Medieval European economy was hit by this abrupt decrease in its population. Among them, Snooks [26] has insisted that in Great Britain, the reduction in the number of people caused by Black Death brought about decrease in real income rather than increase. His following remarks about the economic consequence of Black Death in Medieval Europe allows us to imagine how badly an economy could be hurt by decreasing population more concretely. First, the halving of the economy’s size would have resulted in a backward shift along the long run average cost curve, resulting in diseconomies of scale. Secondly, the organization of the English economic system had to be adapted to a scale of operation that had existed 300 years before, and which none could remember. Thirdly, the stock of physical capital would have declined dramatically through non-use and poor maintenance, particularly because of high rates of depreciation on preindustrial capital. Finally, there may even have been a degree of technological regress, at least in the first few decades after the onslaught of the Black Death [26: p. 262] As we can see, Snooks [26] suggests that after the epidemic, the economy shrank, productivity fell, and the fast deterioration of the unused constant capitals and the technological retrogression followed, which does not mean anything but that with decreasing population, the economic competence as well as the inputs dropped greatly.
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modynamics (Encyclopedia Britannica [8]). It suggests that all the closed systems, like our entire universe, affected by the law, can never be reversible, because its entropy, or its need for sustaining energy, is increasing (Encyclopedia Britannica [8]). We have also seen this idea to be picked up by many critics of modern civilization. Among them, Georgescu-Roegen, Nicholas [11], Schumacher [25], Jeremy Rifkin [24], etc. are representative. They have concentrated on the fact that the rapid growth of industry has required the huge increase in the consumption of natural resources, especially, energy, and consequently, in pollution. It means nothing but that the world economic growth has been feasible with rising entropy and that its irreversible relationship with the amount of consumable natural resources can be found. As we well know, the earth can provide only a limited amount of natural resources. Therefore, when the supply falls, the world economy relying on the modern industry featured with increasing entropy is to be doomed, they have argued. In this context, the entropy model appears applicable in depicting how the world economy and its population are related as well. Above all, the world economy is a perfectly closed system. In addition, we have seen that the growth in population accompanied that in the world economy and that the decrease in the former will result in the latter’s disastrous plunge. Namely, the world economy and the world population can constitute another case of irreversible relationship. Thus, we can hypothesize that because the world economy has always required more people to grow, that is to say, the world economy and the human population have been connected irreversibly, the population implosion will cause the world economy to fall catastrophically. 3. Methodology An economy can mitigate or offset the negative effect originating from declining population by beefing up foreign sector-related activities, such as trade, in- or outward foreign direct investments, etc. Table 3 explains that many advanced countries having been undergoing falling population growth have constantly increased their exports. It tells us that they have compensated foreigners for the shortage in their population. As we know, the second law of thermodynamics, entropy theory, can be relevant only in a closed system and so is our model that explains irreversible relationship between GDP and population. The world economy, the aggregate of all individual economies, is closed, and we are interested in what is going to happen to it. Therefore, to prove the hypothesis, we need to analyze the economies that have been isolated economically or experienced no or little changes in their foreign sectors for a long time. On top of it, for this study to have any meaning for future forecast, we should deal with modern and industrialized ones. We see that North Korea,8 a socialist country that recently suffered from depopulation caused 8
Recently, Krugman attempted to differentiate modern economies into two, whose growth is based on expansion of inputs and on growth in output per unit of inputs [18: p. 63]. Then, he took socialist economies as representing the former, input-driven system, well. In this context, the North Korean economy can be a good subject too.
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Table 3 Exports in GDP (in 1990 price)
France Germany Netherlands UK Spain US Mexico Brazil China India Japan World Rate of growth in volume of merchandise exports in the worlda
1870
1913
1929
1950
1973
1998
4.9 9.5 17.4 12.2 3.8 2.5 3.9 12.2 0.7 2.6 0.2 4.6
7.8 16.1 17.3 17.5 8.1 3.7 9.1 9.8 1.7 4.6 2.4 7.9
8.6 12.8 17.2 13.3 5.0 3.6 12.5 6.9 1.8 3.7 3.5 9.0 0.9
7.6 6.2 12.2 11.3 3.0 3.0 3.0 3.9 2.6 2.9 2.2 5.5
15.2 23.8 40.7 14.0 5.0 4.9 1.9 2.5 1.5 2.0 7.7 10.5
28.7 38.9 61.2 25.0 23.5 10.1 10.7 5.4 4.9 2.4 13.4 17.2
3.4
7.9
5.1
Source: [21] P 362 Table F-4 and P 363 Table F-5. a The numbers in the last row represent the annual average compound growth rates in the period from 1870 to 1913, from 1913 to 1950, from 1950 to 1973, and from 1973 to 1998 respectively.
by the severe drought that had lasted for years earlier, and the Russian Federation, a converted capitalist country that is notorious for its declining population that began about 10 years ago, can work as good subjects. 4. Empirical evaluation 4.1. North Korean economy and population 4.1.1. North Korean economy under deflation Common sense teaches us that North Korea having pursued a truthfully socialist economy must have undergone shortages in all aspects. Table 4 seems to support this idea. We see that from 1995 to 2000, in production, plain downward trends set in almost all North Korean industries, as we expected. It apparently appears that the North Korean economy has been going through shrinkage. However, the North Korean market has behaved quite differently from that of the economy confirmed to have had many serious problems in its output. In Table 5, we find that the North Korean economy has suffered from significant deflations. During the period from 2000 to 2001, the average market price dropped about 27.1% and that surprises us greatly. Nonetheless, Table 6 suggests strongly that this tendency is rather old. Above all, because Table 5 relies on the North Korean official data but Table 6 does on the statistics collected in the small but nation-widely sprouting North Korean private markets free from the government control to some extent, the latter reflects reality better than the former, we can say. In Table 6, comparing the figures of 1998 with those of 2001, we notice absolute drops in prices of almost all goods, even including grain, except vegetables, fruits, beef and fish.
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Table 4 North Korean industry production Industry Energy Coal Electricity Crude oil imports Agriculture and fishery Corn Rice Fish Mining and manufacturing Iron ore Steel Automobiles Cement Light industry Fabrics Synthetic fabrics
Unit
1995
1996
1997
1998
1999
2000
10,000 ton 2370 100 million 230 kW h 10,000 ton 110
2100 213
2060 193
1860 170
2100 186
2250 194
94
51
50
32
39
10,000 ton 10,000 ton 10,000 ton
345 121 105
369 134 88
349 150 65
389 146 63
422 163 66
359 142 70
10,000 ton 10,000 ton 10,000 units 10,000 ton
422 153 0.87 422
344 121 0.85 379
291 102 0.64 334
289 95 0.64 315
379 124 0.73 410
379 109 0.66 460
100 million m2 10,000 ton
1.8
1.5
1.2
1.1
1.0
1.1
5.6
5.6
3.7
3.5
2.7
2.9
Source: Ministry of Unification [30].
North Korea has evidently experienced diminishing supply. However, the fact that the North Korean economy has undergone economy-wide deflation for a while indicates nothing but that demand has dropped faster than supply in the period. The North Korean economy notoriously isolated from the outside does not seem to have been under the sway of the aftermath of the Asian economic crisis in the late 1990s. In addition, it is unimaginable that there happened significant reduction in the national defense expenses believed to take a large proportion of the North Korean budget. Therefore, we cannot help looking for other causes. 4.1.2. North Korean economy and population decrease It is agreed upon that for at least 3 years from 1995 to 1997, North Korea suffered from severe famine. Although there have been various opinions about what Table 5 Price changes in the major North Korean goods in the period between 2000 and 2001 Goods
Rate of change
Goods
Rate of change
Food stuff Meat Fish Vegetables and seaweeds Fruits Seasonings Snacks Beverage
11.5 7.2 102.2 13.6 26.8 0.7 7.7 43.8
Dinning-out Household durables Clothes Pharmaceuticals Stationeries Others
31.6 12.4 23.1 20.7 18.4 2.0
Average
27.1
Source: Ministry of Unification [30].
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Table 6 Price changes in the major North Korean consumer goods in the farmers’ market unit: North Korean Won and percentage Classification
Goods
Unit
1998 price
1999 price 2000 price
2001 price 2000–2001 rate of change
Food stuff
Rice Corn Wheat flour Pork Egg Pollack Cabbage Seaweed Apple Salt Bean oil Red pepper Bread Bottled water Beer Shoes Soap Shirts
kg kg kg kg unit unit unit kg unit kg kg kg unit unit unit pair unit unit
77.0 39.6 61.0 181.0 16.0 32.0 9.0 31.0 23.0 19.3 255.0 273.8 19.0 3.0 78.0 1489.0 92.0 400.0
64.0 32.6 44.5 160.0 13.0 40.9 20.0 30.6 33.1 14.6 163.1 239.4 15.0 17.5 68.2 900 66.3 472.3
49.5 31.8 42.4 138.4 10.0 82.6 14.1 70.0 31.6 13.8 202.6 240.6 17.1 13.3 35 700 82.5 394.9
Fish and meat
Fruits and vegetables Seasonings
Snacks
Others
46.6 27.2 43.1 130.1 11.8 35.0 24.6 67.1 22.9 19.3 194.6 273.8 11.7 30.9 52.5 1180 64.4 613.8
6.1 17.2 1.6 6.4 14.9 136.0 42.9 4.3 37.7 28.7 4.1 12.1 46.9 57.1 33.3 40.7 28.2 35.7
Source: Ministry of Unification [30].
caused the food crisis, many have attributed it more or less to bad weather such as deluge and drought, mismanagement of water, unproductive collective farming, inefficient socialist system itself, etc (see [2]). However, it is still controversial how many North Koreans perished during this unprecedented peacetime starvation. Some are claiming that in the period between 1995 and 1997, about two million people, almost a 10th of the North Korean population or each year, approximately 800,000 people died due to malnutrition or its complications. The others argue that from 1995 to 2000, in North Korea, 600,000 in minimum or one million in maximum people deceased (see Population Council [27]). However, a few taking a more optimistic stance maintain that North Korea might not be hit that seriously by the famine, as we can see in Table 7 based on the statistics prepared by the US Census Bureau. Even so, it shows that in 1998, the North Korean population recorded total 21,234,000 persons, fewer than that of 1995 by 300,000. Put otherwise, in any aspect, nobody can deny that in the relatively short time-span, the North Korean population dropped in absolute numbers. The trend in the estimated North Korean GNP in Table 7 reveals that around 1995, the year the food shortage supposedly began, the economic situation changed dramatically. It is true that before 1995, the North Korean economy experienced shrinkages many times, but it never underwent the headlong plunge like that after 1995. Especially, between 1996 and 1998, while the total population decreased by 1.2%, the North Korean GNP diminished by about 41.1%, as we can see. Even if we
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Table 7 Trend in the North Korean economy
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Population (1000 people)a
GNP (100 million US $)b Per capita GNP (US $)b
20,019 (92.8) 20,361 (94.4) 20,711 (96.1) 21,064 (97.7) 21,361 (99.1) 21,551 (100) 21,512 (99.8) 21,334 (98.9) 21,234 (98.5) 21,386 (99.2) 21,688 (100.6)
231 (103.5) 229 (102.6) 221 (99.1) 205 (91.9) 212 (95) 223 (100) 214 (95.9) 177 (79.3) 126 (56.5) 158 (70.8) 168 (75.3)
1146 1115 1013 969 992 1034 989 811 573 714 757
Note: In the parentheses are the indexed figures compared with those of 1995. a Source: US Census Bureau [14]. b Source: National Intelligence Service [29].
compare these statistics with the gloomiest assessment about the recent North Korean demographic change, we can still find that its GNP fell faster than its population. In addition, Table 8 clearly shows that in the same period, the North Korean primary energy consumption per US dollar of GNP grew, that is, its economic efficiency declined, owing to the reduced inputs, as we have supposed previously. 4.1.3. Irreversible relationship between the North Korean economy and its population Fig. 2 tells us that the North Korean GNP of 1998 not only never reached that of 1994, which the economy had achieved with 1.2% lower population, but also diminished to that of long ago, which it had attained with a far smaller number of people. It means nothing but that the North Korean economy contracted along Path 3 in Fig. 1. Also, the fact that in 1998, no sooner did the North Korean Table 8 Trend in the North Korean primary energy consumption Year
Primary energy consumption [quadrillion (1015) Btu]
Primary energy consumption per dollar of GNP
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
2.94 3.05 3.02 3.12 3.08 3.05 2.97 2.82 2.72 2.76 2.81
127,272 133,187 136,651 152,195 145,283 136,322 138,785 159,322 215,873 174,683 167,261
Source: (1) Energy Information Administration [15]; (2) Table 7.
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Fig. 2. Trend in the indexed North Korea population and GNP.
population begin to increase than its GNP stopped plummeting and started to grow is enough to vindicate that at least in North Korea, entropy theory has governed the relationship between population and economy. 4.2. Russian economy and population 4.2.1. Economy of the Russian Federation Table 9 shows us that the Russian Federation has undergone continuous GDP decrease from 1989 to 1999. We are easily tempted to ascribe it to the malfunctioning remnants of the previous socialist regime that was not replaced completely with a capitalist system yet. However, Table 10 points out that even under socialism, Table 9 Estimated GDP (in PPP: purchasing power parity) of Russian Federation unit: US $ billion Year
GDP
Year
GDP
1989 1990 1991 1992 1993 1994
1518 1492 1454 1333 1210 1069
1995 1996 1997 1998 1999
1050 1020 1035 941 918
Source: OECD [4,13].
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Table 10 Annual GDP growth rate of Russian Federation Year 1966 Growth 7.3 rate (%)
1967 8.6
1968 8.0
1969 4.4
1970 36.7
1971 5.5
1972 4.2
1973 9.2
1974 5.9
1975 6.7
1976 5.5
1977 5.0
Year 1978 Growth 4.9 rate (%)
1979 2.7
1980 24.0
1981 1982 13.2 3.1
1983 4.0
1984 8.0
1985 2.5
1986 5.8
1987 1.4
1988 2.9
1989 2.0
Year 1990 Growth 3.0 rate (%)
1991 5.0
1992 1993 14.5 8.7
1994 1995 12.6 4.1
1996 3.4
1997 0.9
1998 4.6
1999 1.3
Source: OECD [4,13].
this kind of prolonged drop in GDP was never heard of. It seems to perplex many that although Russia converted itself from socialist, known to be inefficient in essence, to a capitalist economy, believed to be efficient, its GDP has fallen rather than leaped. According to Table 11, while the GDP of the Russian Federation drops, its international transaction has not experienced any specific change. Instead, we can find that it has amassed constant trade surplus each year. If the trade and foreign investment of the Russian Federation had grown more rapidly or if the world economy had been more beneficial to it, the reduction of its GDP would have been mitigated greatly. However, it does not mean that the foreign sector is responsible for it, as we well know. Therefore, we have no choice but to look for the endogenous explanation. 4.2.2. Declining Russian population In Table 12, we can find that since 1992, Russia has lost its population. Because differing from the North Korean population decrease caused by tragic famine, the drop in the number of Russian people is largely owing to population aging and declining fertility, it could work as an example illustrating which footstep others are going to follow.9 We can observe how seriously Russia has agonized over its shrinking population through President Putin’s annual address to the Russian 9 About this, in the World Congress of Families held in Geneva, Switzerland, in 2000, Dr. Medkov of Moscow University mentioned as follows:
Since the collapse of communism, Russia’s birth rate—previously very low—had plummeted, and now Russia’s population is falling by about one million a year, due to an aging population and a dearth of babies. Then, he added that Russia is merely ahead of most of Western Europe, which will face the same crisis within a decade or two. (News [28]).
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Table 11 Exports and foreign direct investments of Russian Federation unit: US $ million Year
Exportsa
Importsa
Inward FDIsb
1992 1993 1994 1995 1996 1997 1998 1999
42,376 44,297 53,001 65,607 70,975 69,949 58,751 62,836
36,984 26,807 28,344 33,117 32,798 38,363 32,587 22,201
n.a. n.a. 640 2016 2479 6638 2761 2861
Note: n.a.: not available. a OECD [4,13]. b UNCTAD [33].
Table 12 Trend in Russian population unit: 1000 people Year
Population ð1991 ¼ 100Þ
Year
Population ð1991 ¼ 100Þ
1990 1991 1992 1993 1994 1995
148,082 (99.7) 148,460 (100) 148,587 (100) 148,479 (100) 148,300 (99.8) 148,115 (99.8)
1996 1997 1998 1999 2000 2010
147,757 (99.5) 147,364 (99.2) 146,964 (98.9) 146,516 (98.6) 146,001 (98.3) 142,328 (95.8)
Source: US Census Bureau [14].
people held in July 2000 having emphasized the drastic demographic change as the most acute among the 16 serious problems confronting Russia.10 Table 13 tells us that with decreasing population, the total energy input of Russia has dropped to make its primary energy consumption per dollar of GDP lower than that of 1992. It means that the Russian society in 1992 was more energy efficient than in 2000. Russia had more people in 1992 than 2000. 4.2.3. Irreversible relationship between the Russian economy and its population Table 14 shows that although the Russian GDP and the industrial production appears to recover, still they are far from realizing those of 1991, the year when Russia began to experience its population reduction. On top of it, the statistics make it clear that like the North Korean, the Russian GDP contracted faster than its population. For instance, between 1991 and 2001, the population reduced by a meager 1.7% but the GDP and the industrial production fell by staggering 30% and 35%, respectively. 10
In July 2000, in his first annual presidential address to the Russian people, President Vladmir Putin listed 16 ‘‘most acute problems facing our country’’. Number one on the list, topping even the country’s dire economic condition and the diminishing effectiveness of its political institutions was the declining size of Russia’s population [9].
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Table 13 Trend in Russian primary energy consumption Year
Primary energy consumption Primary energy consumption per dollar of GDP (Btu per 1995 US dollars at market [quadrillion (1015) Btu] exchange rates)
1992 1993 1994 1995 1996 1997 1998 1999 2000
34.88 32.67 29.63 28.24 27.92 25.52 25.62 27.45 28.07
78,959 81,043 84,176 83,590 85,681 77,650 81,905 85,076 80,316
Source: Energy Information Administration [15].
Table 14 Russian GDP (in constant price) and index of industrial output ð1991 ¼ 100Þ Year
GDP
Industrial output
1992 1995 2000 2001
85.5 65.4 69.6 73.1
82 54 62 65
Source: Interstate Statistical Committee of the CIS [5].
Fig. 3. Russian population and GDP.
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599
Adding to it, Fig. 3 reveals that though in 1995, the Russian population declined to become as small as that in 1990, its GDP reduced further to get equal to that of years prior to 1990 with a much smaller population. It proves that the Russian economy has been shrinking along Path 3 in Fig. 1 and that the entropy theory has been applied to the relationship between economic growth and population once again. 5. Conclusions We have ascertained through the analysis of the North Korean and the Russian experience that in a closed system, economic growth is related irreversibly with population and when the latter grows smaller, the former is likely to contract more. From this, we can easily conclude what is going to happen to the world economy, when the number of people on the earth begins to decrease. Then, does it make any sense for us to worry about something that might occur about 50 years later? The answer seems affirmative theoretically. Population aging already embarked on in many developed countries. This trend will continue even under a contracting population. Currently, we are witnessing an aging population that still grows. However, in the near future, we are likely to see population aging come with its shrinkage. A serious problem is that many studies trying to deal with the economic or social effect of aging population do not seem to pay much attention to this difference. This study clarifies that if the total population of a society begins to decline and if there is no change in its international transactions, aging, apparently connoting a decrease in work force, could bring about more damaging impact on the economy than we expect presently. To that extent, we can say that the current analyses not considering the irreversible relationship between economy and population are probably to underestimate the real effect of population aging (see [16]). What should we do for this event? First, all countries should try to maintain their birth rates above the replacement level.11 For this, we must work for a society in which babies are welcomed, not destroyed; children are regarded as a blessing, not an inconvenience; and motherhood is treasured as an honorable vocation (News [28]). The current small efforts by the respective economies will save the world economy a lot in the future. Next, we need to transform the economic system to grow not entailing a larger population. We can deduce that an economy mainly consisting of the industries featured with mass production and consumption, which necessitates them to mobilize massive capital stocks and inputs, will be hurt more seriously by the depopulation than not, because the economic efficiency 11 Mathematically, two babies per one fertile woman are sufficient to maintain the present population size. However, all the babies cannot survive. Therefore, a society usually needs to uphold the fertility ratio of 2.1 to sustain the current number of people. Nevertheless, if the people’s life span continues to increase as we hope, even the 1.7 babies per one fertile woman is known to be enough to replace a society’s current population.
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in the former will be reduced more significantly than in the latter. In this respect, the expanding domain of the new economy,12 which is believed to rely less on mass production and consumption (if not, why call this ‘‘new’’?), is likely to assist us greatly in preparing ourselves for the population implosion. Lastly, we are asked to consider the demographic change more sincerely than before. This study tells us that the ever-increasing world population, which we are so accustomed to that we have even accepted it as a feared natural law not a phenomenon (see [22]), has played an important role in bringing economic prosperity to human beings. It has helped the great advancements in science and technology materialize into wealth and so it will. We see that the efforts to propagate more off springs generation after generation have been not only biologically but also economically reasonable. The endeavors to subdue the population growth in the particular countries have been desirable and will be, but we must keep them in control not to become super effective to cut down the absolute population size. However, this study has some caveats. First, we cannot say that there have been enough empirical evidences contemplated. It largely attributes to that in many countries, the shrinkage of population has not commenced yet. We may need more time to see, but we are certain to witness what we have expected in this study. Second, the real cases, those of North Korea and Russia that we brought forward to support our model do not seem to be easily generalized. Hardly anyone can insist that North Korea and Russia are showing the future of the current industrialized countries. Especially, the North Korean political as well as economic structure appears even anachronistic. Nevertheless, the other countries that have been engaged in international trade and investment actively can rarely provide closed economic systems that we must have to analyze the possible consequence of the world wide demographic change. As we mentioned before, national economies are open but the world economy is not. Only a few countries have experienced or are undergoing depopulation or are supposed to later. Fewer seem to be regarded as having developed closed systems. Unfortunately, North Korea well satisfies these two critical requirements for our analysis.
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12
Gordon [12] defines the representative characteristics of the new economy as the Internet and the accompanying acceleration of technical change in computers and telecommunications.
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[6] B.J. Delong, Estimating World GDP, One Million B.C.-Present, 20th Century, 1998. Available from http://www.j-bradford-delong.net/TECH/1998_Draft/World_GDP. [7] N. Eberstadt, What if it’s a world population implosion? American Enterprise Institute, 1998. [8] Encyclopedia Britannica. Available from http://www.britannica.com. [9] M. Feshbach, Russia’s population meltdown, Wilson Quarterly, 25(1), Winter (2001), 15–21. [10] S. Fischer, R. Dornbusch Economics, McGraw-Hill, New York, NY, 1983. [11] N. Georgescu-Roegen, The Entropy Law and the Economic Process, Harvard University Press, Cambridge, MA, 1971. [12] J.R. Gordon, Does the ‘‘New Economy’’ Measure up to the Great Inventions of the Past? NBER Working Paper No. 7833 (2000). [13] Gross Domestic Product, Volume, Percentage Changes from Previous Period, Seasonally Adjusted, at Quarterly rate, OECD, 2002. [14] International Data Base, US Census Bureau, 2002. Available from http://www.census.gov. [15] International Energy Database, Energy Information Administration, 2002. [16] Y. Kosai, J. Saito, N. Yashiro, Declining Population and Sustained Economic Growth: Can They Co-exist? Japan Center for Economic Research Discussion Paper No. 50 (1999). [17] A. Krause, R. Raikhlin, The Economy as an Irreversible Thermodynamics, unpublished working paper. Available from http://www.israel.net/raikhlin /social_dynamics/myengbook. [18] P. Krugman, The myth of Asia’s miracle, Foreign Affairs November/December (1994) 62–78. [19] P. Krugman, Setting Sun, Japan: What Went Wrong? 1998. Available from http://web.mit.edu/ krugman/www/japan.html. [20] S. Kuznets, Population change and aggregate output, in: Universities—National Bureau of Economic Research, Demographic and Economic Change in Developed Countries; A Conference of the Universities-National Bureau of Economic Research, Princeton University Press, Princeton, NJ, 1960. [21] A. Maddison, The World Economy: A Millennial Perspective, OECD, 2001. [22] T. Malthus, in: F. Antony (Ed.), An Essay on the Principle of Population, Penguin Books, New York, NY, 1985. [23] Persistent Drop in Fertility Reshapes Europe’s Future, New York Times, December 26, 2002. [24] J. Rifkin, Entropy: A New World View, Bantam Books, New York, NY, 1981. [25] E.F. Schumacher, Small Is Beautiful; as if People Mattered, Harper&Row, New York, NY, 1973. [26] G.D. Snooks, Economies without Time, Macmillan, London, England, 1993. [27] The North Korean Famine and its Demographic Impact, Population Council, June 2001. [28] The Age of Depopulation, News, January 15, 2002. Available from http://www.newsweekly. com.au. [29] Trend of the North Korean GDP, National Intelligence Service, 2002. Available from http:// www.nis.go.kr. [30] Understanding North Korea, Ministry of Unification, 2002. Available from http://www.unikorea. go.kr. [31] UN: World Population Aging Rapidly In Developing Countries, Radio Free Europe Radio Liberty, April 10, 2002. [32] World Population Prospects, Highlights, UN, various years. [33] World Investment Report, UNCTAD, 2000.